Now taxman's errors are YOUR FAULT: HMRC moves goalposts so it is up to taxpayers to spot mistakes

Workers and pensioners are being warned to double-check their tax codes or face being landed with shock bills that they cannot appeal.

More than 20 million codes, which tell you how much of your income will be tax-free, are sent to 16 million people at this time of year.

But already Money Mail has seen several cases where the code - a combination of letters and numbers - is wrong.

Mistakes typically occur when someone has several sources of income or where they have received a large one-off boost, such as a dividend payment, in the previous year.

This can leave someone paying too much or too little tax in future years. The problem is compounded because a rule that allows taxpayers to fight unfair bills is being quietly thrown out by HM Revenue & Customs, we can reveal.

Tax bosses want to overhaul a special concession used by hundreds of thousands of people each year to contest debts they believe have been caused by mistakes at HMRC.

The new rules make taxpayers themselves directly responsible for checking their code is correct and spotting mistakes. If they fail to do this, their appeal will not be upheld.

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This will make it all but impossible to claim, since the vast majority rely on their employer or pension provider to take care of tax matters.

Previously, to qualify for an appeal the mistake had to have been spotted within 12 months of the end of the tax year, and the people owing the cash had to have had no reasonable way of knowing they were underpaying.

These changes could leave many with nasty surprise bills for unpaid tax facing a series of impossible tests to prove they’ve done everything to ensure their tax was right.

Even though the rules have not yet been changed, many cases already appear to be rejected using tougher guidelines.

HOW TO GET ON TOP OF YOUR TAX CODE

HM Revenue & Customs usually sends a different tax code for each income you have. The letters and numbers indicate how much you are allowed to earn before paying income tax.

The amount of your tax-free allowance — which for the new tax year is £9,440 for anyone born after April 5, 1948 — is the three digits in your code multiplied by ten.

The most common letters you will receive are:

L - you’re eligible for the basic personal allowance, so 944L.

K - you have extra untaxed income such as company private healthcare.

BR - all this income is taxed at the basic rate of 20 per cent. This is usually because you have several incomes.

P - is for people aged 65 to 74 and eligible for the full personal allowance.

Y - is for those aged 75 or over and eligible for the full personal allowance.

Paul McKay, tax director at accountant Booth Ainsworth, says: ‘We’ve noticed much more of a blanket approach taken by HMRC staff — they are giving an outright "no" to appeals from the start. This is having a huge impact on ordinary people who can’t afford professional advice.’

The so-called Extra-Statutory Concession, called ESC A19, currently allows HMRC to write off tax owed if you did everything possible to ensure your bills were correct.

Most tax underpayments are caused by a wrong code. Problems only come to light after the end of a tax year when officials tot up what everyone has paid on different incomes and send out demands.

ESC A19 has proved a useful weapon against incompetence at HMRC as it gives innocent taxpayers a waiver from unexpected bills.

Between September 2010 and March 31, 2012, 166,244 concession claims were made. Some 41,766, or one in four, were successful, saving taxpayers £53.7 million.

Onus on the taxpayer: People will be responsible for checking their tax code is correct and spotting mistakes, not HMRC.

But now HMRC plans to tighten the rules and impose its even sterner test. The sheer difficulty of taking on the taxman is highlighted by the case of Avery Emery.

The 80-year-old former teacher from Kingston-upon-Thames, Surrey, was recently hammered with tax bills for more than £800 out of the blue — despite officials owning up to two serious blunders that caused the problems in the first place.

Only after Money Mail intervened did HMRC concede it had badly handled Miss Avery’s complaint and agreed to waive both bills — a total of £850. It also paid her £50 in compensation.

Miss Emery says: ‘I feel there is no way of defending myself against this self-righteous juggernaut of a tax office. They don’t give the customer service one should expect, so why can’t the individuals be held to account?’

An HMRC spokeman says a new system requiring tax records to be updated in ‘real time’ will mean the concession will go the way ‘of the dodo’.

He says: ‘ESC A19 itself can no longer apply in all but a handful of cases as we reconcile all cases at the end of the tax year.’